How to Calculate Equipment Cost

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The cost of equipment for a company is simply how much the company paid for the equipment. However, if this information is not readily available, it is possible to calculate the cost of equipment using a company's balance sheet. Normally, a company will record assets on the balance sheet at the cost of the asset. However, the book value of the asset will equal the cost of the asset minus accumulated depreciation. Therefore, with the book value of the asset and the accumulated depreciation on the asset, it is possible to calculate cost.

Find the book value of the equipment on the company's balance sheet. The book value is the amount the equipment is currently worth. If the company aggregates its assets, you may have to look at the company's notes to the financial statements. For example, a company has a widget making machine on its books at $500,000.

Find the accumulated depreciation for the equipment. Accumulated depreciation is a contra-account, so it will reduce the original balance of the equipment. Usually, companies list accumulated depreciation under the asset. In the example, the widget making machine has $20,000 of accumulated depreciation.

Add the book value of the asset to the accumulated depreciation. In the example, $500,000 plus $20,000 equals a cost of the equipment of $520,000.


About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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